Friday, July 15, 2011

How the system works: "Change Order"

As an architect responsible for upwards of $300M in construction during the last decade alone, I think I have some insight to lend here. Construction, especially of multi-million dollar fast-tracked projects, is an extremely complex undertaking from start to finish. But at the most basic level the reason government projects cost more is the process. Government construction projects, by law, go to the low bidder.

In order to issue the lowest bid possible in a competitive environment, contractors short-change the bid; they bid less than it will cost to build. They do this knowing that they will be able to issue Change Orders during construction. Every mistake by the designer (a perfect set of construction documents is by definition impossible), every un-foreseen condition, every minor change by the government entity, is an excuse for the contractor to re-capture the money they left out of the original bid and more.

I say this not as a knock on contractors; it's just how the system is designed to work. Demanding that the lowest bidder get the job is the same as demanding huge cost increases.

A couple years ago an image of a yacht was making the rounds online. The name of the yacht was “Change Order” and its tender, or dinghy, was named “Original Contract.” That pretty much illustrates the game.